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90 seconds at 9 am with BNZ: RBA holds; Obama concedes tax cuts to rich; Europe relies on ECB to survive; Gold hits record; Oil over US$90/bbl

90 seconds at 9 am with BNZ: RBA holds; Obama concedes tax cuts to rich; Europe relies on ECB to survive; Gold hits record; Oil over US$90/bbl

Bernard Hickey details the key news overnight in 90 seconds at 9 am in association with Bank of New Zealand, including news the Reserve Bank of Australia has held its official interest rate at 4.75% and suggested it will leave it there for some time.

The RBA is dealing with the inflationary pressures from the biggest mining boom in a century, but says it can rely on a strong Australian dollar and big mortgage rate increases from the banks to help it control the economy.

Our Reserve Bank is also widely expected to hold our Official Cash Rate at 3% at 9 am on Thursday. The focus will be on when it is likely to increase the OCR again. Economists are saying the next hike is likely either in March or in the June quarter, while markets are inclined towards a June quarter hike.

Meanwhile, US President Barack Obama has agreed a compromise proposal with congressional Republicans to extend tax cuts for both middle income and high income Americans. Extending tax cuts was a key issue in the recent mid-term elections. Democrats are unhappy that the richest Americans will continue to receive tax cuts, making it much tougher to return the US budget to surplus.

Republicans and the markets are happy that the tax cuts may boost their wealth and potentially trickle down to the economy broadly.

However, the yield on the US 10 year Treasury bond rose 19 basis points to a five month high of 3.12% on fears the US will find it more difficult to service its debt and after a poorly received auction of new debt.

Meanwhile, the price of Gold rose to a fresh record over US$1,430/oz on fresh concerns about a third round of US quantitative easing and fears about the European debt situation. Gold investors are worried that money printing on both sides of the Atlantic undermine the value of currencies, pushing investors into hard assets that might hold their value.

Ireland's new austerity budget is being put to a vote later today. It includes pay cuts for the PM, ministers and senior civil servants and new stamp duties on property taxes.

Meanwhile European leaders have rejected the idea of increasing the size of the European bailout fund and are instead relying on the European Central Bank buying bonds to ease stress in the markets.

The price of oil also rose to US$90/bbl as demand for diesel from China remains strong and a cold European winter increases demand for heating oil. However it dipped back in later New York trade.. The price of copper hit a record high.

The New Zealand dollar was steady around 76 USc.

Closer to home, Stuff reports that receivership is possible for Pike River Coal.

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16 Comments

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I think Fran O'Sullivan got out of the wrong side of the bed this morning. GST to 20%!

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10692767

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On Fran O'......Whew....whew....this would be enough to make a parasite go deep cover...it's in the blood you see Fran......some excellent ideas... but idealism sooner or later has the life kicked out of it by those who don't wish to participate...in life as a developing project.

I rate your article highly...save GST...(cringe) but see where your going with it.......I give it a snowball's chance in....well you know the rest. 
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Inderstandable in a way - in fustration not only jurnalists writ a lot of BS - me too !

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What's wrong with taxing at the point of consumption? Its efficient, effective and fair. The UK has moved VAT to 20% and the world hasn't ended there (yet). Of course, here in NZ it would need to be offset with further income tax reductions, probably at the lower end. But incentives change behaviour, and our current tax system incentivises debt and avoidance.

Actually I think this piece from Fran should be lauded for finally airing a number of issues in the MSM that Bernard has been a lone champion of to date e.g. CGT/Land tax, super and public sector revamp, WFF etc...

And she wants to tax the australian banks too - Go Fran!!

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I would echo the same thoughts as Chris B. My view has been that systems shape public behaviour and the property/other bubbles reflect systemic causes and condemning individuals, BB etc would not fix the problems. Fran s suggestions point to systemic change. I especially like the point about Bank Bastards.

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Nomad ...I too agree with most of her sentiments.......the problem with systemic change is that it will require a ..".will"...on the part of the system.......and so it follows that a change in the system as we know it must be the first order.

Nothing short of a revolt and en mass public disobedience will dislodge the parasitic element firmly entrenched in that termite mound we call a Beehive.....I am quite sincere in saying that.........Key will not have the... will.......and even if he did it would become secondary to the desire to retain...the power.....assured by the Status Quo .

Unfortunately the mini revolts of this world are left to the fringe..... who if not eventually part of the system and therefore part of the problem.....are considered lefties...loons...mindless malcontents.

While I considered at the time Bob Jones's uprising as pithy and tactical....we have again reached a point where it appears necessary....but this time with the conviction to see beyond just dethroning the King.....but to structurally change the make up of Government itself.

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Review of New Zealand's constitutional arrangements

http://www.stuff.co.nz/national/politics/4434849/Review-of-New-Zealands-constitutional-arrangements

Could start by halving the number of MP's surely!!

Also the whole Treaty of Waitangi & separate Maori electorates/seats need a serious review. In this day & age surely its about time we all became New Zealanders & move fwd. At some point they are going to have to say what happened in the past happened & move on. I consider this one area holding NZ back.

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Could start by halving the number of MP's surely!!

I tried once to work out what our mp per capita was in comparison to other  'Westminster' type systems (got bored) - it did seem very disproportionate - maybe someone else actually completed this work or knows where to find it.

e.g

very crudely....... and ignoring the upper house.

uk population 65 million - 650 seats in the commons - 1 seat per  100,000 population

nz population 5 million - 120 seats in the commons - 1 seat per   41,000 population

maybe we're just more representative / democratic.


The issue I couldn't quantify was the 'economy of scale' - Do we have governmental systems to cater for  a higher population than exists? Is there any 'best practice' for Westminster systems - is the work done?
 

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There's going to be a constitutional review...Sir Humphrey WILL be pleased...these can be stretched out every which way and promise heaps of paper shuffling 'work' for so many on the state payroll....knighthoods have been dished out for less....salary rises if the results are in line with govt wishes....it's a xmas present for Sir Humpy

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If NZ ever became a republic where does that leave the maori monarchy?

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I reckon that it  would  leave the Maori monarchy exactly where  it  currently is .

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March ?.... June ?.... how about tomorrow ¡¡¡

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"The value of new home building stalled in the September quarter amid a slowdown in the economic recovery. The value of residential building work put in place dropped 5.3 per cent to $1.65 billion in the three months ended Septempber 30, says Statistics ..."herald   Goldman Sachs economist Philip Borkin said while today's statistics were broadly in line with expectations, there was still a chance that the economy actually contracted during the September quarter.

He is predicting a 0.2 per cent growth in GDP from the previous quarter.

"...the fall in residential construction activity was entirely expected," said Borkin. "Putting the impact of Canterbury reconstruction work aside, we believe residential construction activity looks set to languish over the coming quarters, given weak leading indicators (house sales and consents) and a belief that structural issues around affordability and credit availability are lingering."

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 "Finance Minister Bill English says the Government wants SOEs to perform better and this may require some restructuring.

Documents obtained by Radio New Zealand under the Official Information Act show the Treasury has suggested SOEs could pay higher dividends by taking on more debt.

An independent consultant on financial accounting, Alan Robb, says profitability shouldn't be the only rationale.

He says it makes no sense for SOEs to borrow heavily, when private companies are trying to get rid of debt." rnz

"more debt"...how much do we pay these financial wizz kids at Treasury!

Hey Bill....try restructuring the bloated salaries they give themselves in the SOEs....

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 "Green MP Sue Kedgley has drafted a member's bill to set up a supermarket code of practice and a supermarket ombudsman to ensure consumers are treated fairly."nbr

haaarrrrhahaha....is she green or a deep shade of pink....imagine it and of course the new supermarket ombudsman would need a whole heap of staff and a new multi story building with offices in every city....fabulous scheme to create 'jobs'....wonder if Sue was looking in a mirror when she dreamed this one up..........how much does she collect in handouts from taxpayers every year for producing this sort of garbage?

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